WASHINGTON-Recent public violations of the Bank Secrecy Act,such as the Riggs Bank incident, have led to increased scrutiny bythe federal financial regulators. So far, just one creditunion-Suffolk Federal Credit Union in November 2004-has been hitwith a Letter of Understanding and Agreement for a BSA violation.However, as examiners continue to intensify their focus, more couldbe coming, one D.C. law firm warned. According to attorneys fromVenable, LLP, credit unions' biggest hurdle can be a lack ofresources, especially the smaller institutions. And smaller doesnot necessarily equate to being at less risk; really it comes downto complexity of operations. The Federal Financial InstitutionsExamination Council regulators, including NCUA, have been very openabout what they will be looking for, particularly through theexaminers on the front lines. In fall 2005, NCUA issued a Letter toCredit Unions (05-CU-16) alerting them to the FFIEC's Bank SecrecyAct/Anti-Money Laundering Examination Manual the agencies issuedover the summer. The letter also included the Automated IntegratedRegulatory Examination System's (AIRES) BSA questionnaire thatexaminers began using to review programs as of Sept. 30. The threekey pieces of advice in the letter point to: *Risk Assessment*Independent Testing *Monitoring Suspicious Activity Some of themost important things a credit union can do is find someoneknowledgeable of the issues, make sure the board of directors isinvolved, scrutinize transactions, and do basic member duediligence. The “basic building blocks” of a solid BSA programinclude: * Having a compliance officer; * Undergoing an audit; *Keeping up on internal controls and training; * Establishing aCustomer Identification Program; * Identifying targets ofTreasury's Office of Foreign Asset Control; * Complying with lawenforcement requests; and * Putting policies in place to supportthese things. It is also helpful to have automated systems inplace, like aggregation software to track multiple transactions bythe same member. Credit unions are not likely to be hit with aRiggs $40 million fine, but it would be commensurate with the sizeof the institution and the significance of the violation. On top ofthat is the reputational damage. Riggs was a prominent bank inWashington, D.C., but had to sell out to PNC because of theincident. -

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